By Ann Atkinson
The nation’s housing is in a state of crisis. New supply of for-sale homes, particularly in the first-time starter home category, continually fails to meet demand. This, coupled with recent interest rate rises, is pricing many would-be buyers out of homeownership. The impact on monthly mortgage payments of the 2.0 percentage point hike in interest rates from December 2021 to mid-April 2022 alone is equivalent to a 27% jump in home prices[i] (and rate hikes obviously didn’t stop in April).
Many who were in the market for a new home just months ago have been forced back into the rental arena where prices are also rising. According to CoStar data, recent growth for 4- and 5-star apartments was 13.5% year-over year in the first quarter of 2022, more than five times the 2.5% annual average in 2015-2019; rents for moderate-quality, or 3-star, units were up 12.1% in early 2022 from a year earlier, more than three times their pre-pandemic 3.8% average; and rents for 1- and 2-star units rose 5.9% year-over-year in the first quarter of 2022, well above the 3.5% growth rate averaged in 2015-2019.[ii]
The uptick in construction of new multifamily units is somewhat promising. Starts hit a 30-year high in 2021 with 474,000 and continued into the first quarter of 2022 with 124,000, however the majority of new units have added supply almost exclusively at the upper end of the market, with rents generally out-of-reach for low- and moderate-income households.[iii] For the first-time ever, median rents in the 50 most populous U.S. metros is more than $2,000 and in no state, metro or county in the U.S. can a worker earning the federal or prevailing state or local minimum wage afford a modest two-bedroom rental home at fair market rent by working a standard 40-hour work week.[iv]
With new apartment supply targeting higher income Americans, lower income Americans are severely underserved. Demand far outweighs supply. Thus, the health of the country’s existing affordable units is key and the industry must do what it can to keep this supply available to renters. As a nationwide lender with a core specialization in the finance of workforce and affordable apartment properties, Sabal is committed to serving this segment of the rental marketplace. Our team offers a suite of debt solutions for borrowers looking to purchase, refinance and/or complete sustainability-focused improvements to affordable apartment properties across the country.
Exploring all available finance options can be daunting for borrowers, but our team is here to assist. Whether you’re looking for a long-term fixed rate or short-term hybrid ARM, we provide the most competitive options in the market. We also regularly help borrowers navigate all sustainability focused finance programs, to take advantage of incentives and better rates when possible. Contact us today and we’ll help you get started.
About the Author
Ann Atkinson is Managing Director, Small Loan and Market Real Estate Production for Sabal Capital Partners, LLC, a wholly-owned subsidiary of Regions Bank, overseeing production across the nationwide lender’s Freddie Mac and Fannie Mae loan programs. Visit www.Sabal.com.
[i] Joint Center for Housing Studies of Harvard, The State of the Nation’s Housing 2022, https://www.jchs.harvard.edu/state-nations-housing-2022
[ii] Joint Center for Housing Studies of Harvard, The State of the Nation’s Housing 2022, https://www.jchs.harvard.edu/state-nations-housing-2022
[iii] Joint Center for Housing Studies of Harvard, The State of the Nation’s Housing 2022, https://www.jchs.harvard.edu/state-nations-housing-2022
[iv] National Low Income Housing Coalition, Out of Reach 2022: The High Cost of Housing, https://nlihc.org/sites/default/files/oor/2022/OOR_2022_Mini-Book.pdf